Question

You put half of your money in a stock portfolio that has an expected return of 14% and a standard deviation of 36%. You put the rest of your money in a risky bond portfolio that has an expected return of 6% and a standard deviation of 12%. The stock and bond portfolio have a correlation 0.35. The standard deviation of the resulting portfolio will be ________________. Use Portfolio variance formula A. more than 18% but less than 24% B. equal to 18% C. more than 12% but less than 24% D. none

Answer 1

     

_______________________________

_______________________________

SDs = 0.36

SDb = 0.12

Ws = 0.50

Wb = 0.50

R(s,b) = 0.35

SD =  

=

=

= 0.20871032557 OR 20.87%

Option C is correct. More than 12% but less than 24%

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